Halftime Pt. 1: S&P 1040, Bulls' Last Stand?

Tuesday could be tell-tale day in the stock market with the bears attempting to force the bulls into full retreat mode.

Around lunchtime investors were watching 1040 on the S&P to see if this former level of support would hold yet again.

Is the market building a base or is the S&P about to break?

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The more times we probe a reference point, in this case a past low, the greater the likelihood that we exceed the low, explains widely followed technical analyst Carter Worth of Oppenheimer.

1040 is a critical level because it was the autumn low of 2009, the February low of 2010 and the May low of 2010.

My expectation is that this time 1040 will give way, says Worth. I think the S&P goes down to 980. But then we’ll probably be at a point where the market is oversold, Worth says.

If the S&P breaks below 1040 it has to trade below that level for at least 24 hours for the analysis to play out, adds OptionMonster Jon Najarian.

If we just break below quickly, it’s entirely possible the S&P pops right back up, Najarian adds. And if that happens I’d take it to mean 1040 is the base.

I’m not ready to think we’re going to make a deep dive either, says Joe Terranova. Gold is only up slightly on Tuesday. If a whoosh to the downside was imminent, the market would have pushed gold much higher.

On a related note, of the 23 companies in the S&P 500 that exceed $100 billion or more in market cap; only 2 have good charts; they are Berkshire and Apple , says Worth. They’re not market related stocks, and that too is bearish, Worth says.

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